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From Farben to Lafarge: The Unending Saga of Corporate Liability in International Law

About the Author: Nirmalya Chaudhuri is a law student at the West Bengal National University of Juridical Sciences, India.

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On June 17, 2021, the United States (US) Supreme Court dismissed a suit against Nestle USA Inc. (Nestle) and Cargill Inc. (Cargill) alleging that these companies had aided and abetted child slavery in cocoa farms in Ivory Coast. Although the farms were operated by third parties, Nestle and Cargill pumped substantial technical and financial resources into the farms’ operations. The entire case revolved around the extraterritorial application of the much debated Alien Tort Statute (ATS), which gives US district courts jurisdiction over claims brought by foreigners for torts committed in violation of international law. The Court based its decision on the premise that invoking ATS in this case would amount to extraterritorial application of the law. This is because the companies concerned carried out only “general corporate activity” in the US, a standard that is insufficient to draw a link with the alleged activities in Ivory Coast. By focusing on whether applying the ATS was an extraterritorial application of the law, the Court avoided analyzing whether corporations can be held liable for their actions under international law.


For decades, US Courts have consistently argued that corporations are immune to international law, supporting their argument by reference to the Nuremberg Trials. However, this argument flows from a myopic misreading and misinterpretation of history. At the end of the Second World War, the International Military Tribunal at Nuremberg faced the issue of whether to charge certain German corporations, like IG Farben, for supporting the Nazi war effort. Although the Tribunal declined to hear claims against IG Farben, it did not do so because it found that IG Farben had not violated international law. While US Courts have continued to invoke the Nuremberg Trials as support for corporate immunity, various jurisdictions in Europe have adopted legal regimes that impose extraterritorial liability on corporations. Efforts like France’s “veil piercing” legislation are a welcome change.


THE GHOST OF FARBEN: DEBUNKING THE MYTH OF CORPORATE IMMUNITY IN INTERNATIONAL LAW


In 2002, the Ninth Circuit Court of Appeals broke the mold, holding that natural gas company Unocal could be liable under the ATS for assisting the Myanmar military in subjecting villagers to forced labor. This progressive legal proposition could have served as a signal that corporate impunity was not allowed under international law. However, in the 2010 Kiobel v. Royal Dutch Petroleum Co. opinion, the Second Circuit held that corporate liability was not customary international law (CIL) because corporations have never been tried for violating international law in the history of international criminal tribunals. Eight years later, the US Supreme Court applied this same rationale in Jesner v. Arab Bank.


While corporations themselves have never been prosecuted for criminal conduct, analyzing historical context shows that mere precedent should not absolve them from liability. The Nuremberg Tribunal prosecuted executives of IG Farben individually for supplying the deadly Zyklon B Gas to the Nazis and engaging in slave labor. But the tribunal declined to charge the corporation itself because the Allied Powers had seized the assets of IG Farben before the Nuremberg Trials had even begun. Therefore, the tribunal’s decision to prosecute the executives rather than the corporation resulted from the fruitlessness of prosecuting a defunct company rather than IG Farben’s immunity from wrongdoing.


Several dissenting voices have raised this counterargument. In the 2014 case In re South African Apartheid Litigation, a District Court in New York opined that the mere fact that no international tribunal had ever proceeded against a corporation was insufficient proof that corporate liability was unknown in international law. The D.C. Circuit put forth perhaps the most compelling argument against corporate immunity in Doe v. Exxon Mobil Corporation. There, the Court highlighted the nuance in the historical context surrounding the Nuremberg tribunal’s decision not to put IG Farben on trial.


EXTENDING THE LONG ARM OF THE LAW: THE ISSUE OF EXTRATERRITORIALITY


US Courts have often cited the problem of extraterritoriality to justify a conservative approach in cases filed under the ATS. For instance, the primary ground for dismissing the Nestle case was the fact that all the alleged instances of slavery took place outside the borders of the US, and “general corporate activity” by US companies could not be the sole reason for holding them liable for misdeeds committed abroad. Although complex corporate structures, in which the parent corporation and its foreign subsidiaries are legally distinct entities, often create roadblocks in holding multinational corporations accountable, Courts can “pierce the corporate veil” to curb transnational crimes committed by corporations without compromising doctrinal clarity.


In the United Kingdom (UK), for instance, Section 54 of the Modern Slavery Act, 2015, requires certain corporations to ensure that slavery and human trafficking are not taking place throughout their supply chains, which often involve overseas actors and suppliers. Such a standard could have been used as a potent accountability tool in Nestle because the alleged slavery was committed in the farms of Ivory Coast, which were part of the supply chains of Nestle and Cargill.


In 2017, France enacted a landmark “law on due diligence” that imposes liability on parent corporations that fail to conduct due diligence in ensuring that their foreign subsidiaries and suppliers do not violate human rights. While this law has limited extraterritorial application, parent corporations often exert overwhelming influence upon their foreign subsidiaries’ business activities. In 2020, Syrian workers and two NGOs filed a criminal complaint under the law on due diligence to charge Lafarge, a French multinational corporation, for the financial assistance its Syrian subsidiary gave to the Islamic State. A more widespread application of veil piercing would go a long way in ensuring that a parent corporation cannot feign ignorance while its subsidiaries commit grave violations of law abroad.


CONCLUSION


The recent tendency of US courts to restrictively interpret the ATS and hinder its extraterritorial scope is gravely inimical to protecting human rights abroad. US courts’ reliance on the non-prosecution of IG Farben at Nuremberg, to justify corporate immunity flows from a misguided reading of historical facts. In this connection, any effort aimed at extending the scope of application of domestic laws to cover the acts of foreign subsidiaries is a welcome step. As the French experience and the recent Lafarge case shows, disregarding doctrinal concerns of extraterritoriality is a small price to pay for protecting human rights abroad. The theoretical uncertainty surrounding corporate liability under international law continues to persist, creating a dangerous incentive for corporations to sacrifice human rights at the altar of business expansion.



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